Key Takeaways
- Dealerships faced new reporting requirements in 2023, including providing a seller report to clean vehicle buyers at the time of sale and an annual submission to the IRS.
- The IRS has temporarily extended the original submission deadline for 2023 seller reports to February 15, 2024.
- In 2024, registration through the IRS Energy Credits Online Portal is required to submit seller reports and to receive advance payments of the buyer’s tax credit.
The IRS has released several revenue procedures and other guidance to assist qualified manufacturers and sellers of new and pre-owned clean vehicles with new reporting requirements under the Inflation Reduction Act (IRA).
Seller Reports
In December 2022, the IRS released Rev. Proc. 2022-44 implementing new reporting requirements for clean vehicles sold in calendar year 2023. The clean vehicle credit dealer requirements began January 2023 for dealers and sellers of new and pre-owned clean vehicles and included:
- A seller report (also known as a time-of-sale report) must be provided to clean vehicle buyers at the time of sale.
- A submission of all calendar year seller reports must be compiled and submitted to the IRS before January 15 of the following year (temporary extension to February 15, 2024, for 2023 calendar year sales, Rev. Proc. 2024-12).
Beginning January 1, 2024, all seller reports are required to be submitted electronically through the IRS Energy Credits Online Portal. Clean vehicle dealerships will need to register prior to submitting reports online.
The guidance also provides that sellers must furnish new and pre-owned clean vehicle buyers a copy of the seller report. The specific requirements are based on the sale date of the vehicle.
| Vehicle Sales Date | Seller Report Requirements |
|---|---|
| Calendar Year 2023 |
|
| January 1 - 16, 2024 |
|
| January 17, 2024 and after |
|
Direct Credit Transfer
The IRA allows the New and Pre-Owned Clean Vehicle Credit to be transferred directly from the buyer to the seller. Beginning January 1, 2024, buyers will be able to transfer the full credit to dealers at the time of sale for cash, a reduction of the vehicle’s purchase price, or a partial down payment. This will provide buyers with the immediate benefit of the credit without waiting to file their tax return.
Dealer registration is also required to be eligible for participation in the direct transfer program, including federal income and employment tax compliance.
Here are the key components of the direct credit transfer program, which include information on the options for buyers, as well as how the transfer can be registered when a new clean vehicle sale is made.
Buyer eligibility for the credit:
- Buyers may choose to claim either Clean Vehicle Tax credit on their tax return. Transfer is not required.
- Once the transfer has been completed, the election is final.
- Buyers must disclose specific information and attest they meet applicable credit requirements at the time of sale.
- If the buyer’s income exceeds the credit’s modified adjusted gross income limitation, the credit will be repaid on the buyer’s tax return, not to the dealer/seller.
- The amount of the credit transferred may exceed the buyer’s tax liability. The excess is not subject to repayment on the buyer’s tax return.
- Buyers may transfer no more than two clean vehicle credits to dealerships each tax year, and only one of the two may be for a pre-owned clean vehicle credit.
- The credit transfer can only be made on vehicles predominantly used for personal use, not business use.
Dealer/seller eligibility for direct transfer:
- Credit transfer deposits are expected to be completed within 48 to 72 hours after the payment request is submitted.
- Registration is required to participate in the advance payment program.
- The advance payment is treated as repaid by the buyer to the dealership as part of the purchase price of the vehicle, and therefore is treated as included in the total revenue received from the sale transaction.
Next Steps for Dealerships
Dealerships selling new and pre-owned clean vehicles to buyers interested in claiming the credit must register on the IRS portal. Registration is required for dealers and sellers to complete annual reporting and to receive advanced payments beginning in 2024. For additional information, review the Clean Vehicle Fact Sheet, which is updated as new procedures and guidance become available.
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